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Chart of the Week: Wall Street's 'Fear Gauge' Is Flashing Possible Bitcoin Bottom
The bitcoin to VIX ratio might be signalling a potential long-term bottom for BTC price.
What to know:
- The S&P Volatility Index has surged to its highest level since last August, indicating increased market uncertainty.
- The bitcoin to VIX ratio has hit a long-term trendline, historically suggesting a potential bottom for bitcoin prices.
- This trendline has previously marked the bottom for bitcoin during major market events, followed by price rallies.
It’s been an exceptionally volatile week, but one measure may be signaling longer-term bullish sentiment for bitcoin.
The sell-off in equities began on April 3, spurred by President Donald Trump's tariff-led uncertainties. Each day since then has been marked by sharp moves in both directions. The panic has hit both the equities and bond markets, while gold has surged to new all-time highs, and the DXY Index has broken below 100 for the first time since July 2023.
STORY CONTINUES BELOW
In response, the S&P Volatility Index (VIX)—often called Wall Street's "fear gauge" —has surged to its highest level since last August and this is where things get interesting for bitcoin.
The ratio of bitcoin to VIX has hit 1,903 currently, touching a long-term trendline that last time coincided with market volatility around the unwinding of the yen carry trade. At the time, bitcoin had reached a bottom of around $49,000.
In fact, this is the fourth time this ratio has hit the trendline and then found the bottom. Previously, it touched the line in March 2020 during the peak COVID-19 crisis and initially in August 2015, both times followed by a rally in prices.
If this trendline continues to serve as reliable support, it could suggest that bitcoin might have once again found a long-term bottom.
Read more: Bitcoin’s Recent Drawdown Proves Its More Than Just a Leveraged Tech Play
James Van Straten
James Van Straten is a Senior Analyst at CoinDesk, specializing in Bitcoin and its interplay with the macroeconomic environment. Previously, James worked as a Research Analyst at Saidler & Co., a Swiss hedge fund, where he developed expertise in on-chain analytics. His work focuses on monitoring flows to analyze Bitcoin's role within the broader financial system. In addition to his professional endeavors, James serves as an advisor to Coinsilium, a UK publicly traded company, where he provides guidance on their Bitcoin treasury strategy. He also holds investments in Bitcoin, MicroStrategy (MSTR), and Semler Scientific (SMLR).
